The question “What is the client organization’s external environment?” is often the appropriate first step in assisting an ACT client. A nonprofit organization’s mission, vision, values, and strategy all must be well matched to the environment in which it functions for the organization to thrive.
It can be difficult for a consulting team or a client to focus this important question because of the large scope of the phrase “external environment.” Talking to board members, potential and active donors, staff members, industry experts, and those served by the client can help to define it more clearly within the specific context. In response to this complexity, ACT has created a quick and simple template for understanding the external environment. The results of an Environmental Scan project will be valuable to clients as a stand-alone project or as part of a larger project.
Part A: Nearby organizations review
Inside and outside of an organization there are often different perceptions about the uniqueness of the organization’s mission and services. Some believe the organization to be absolutely unique while others see the organization as having overlapping mission, geography, processes, or funding sources with other organizations. A comprehensive survey allows all stakeholders to work from the same facts about exactly which organizations are serving the community of interest.
Part B: Peer organizations review
Peer organizations—”those organizations having very similar missions, theories of change, processes, and outcomes—can be a valuable source of ideas and quantitative metrics. Relative performance to peers is one of the (many) ways to understand an organization’s performance and how well the organization is matched to the external environment.
Suggested Process - Part A
1. Create a comprehensive list of organizations working in the same geographic area that provide similar or complementary services.
Data should be gathered from discussions with multiple members of the client’s staff, Internet keyword searching (e.g., girls education San Mateo County), and discussions with local experts. This list should be as extensive as possible.
2. Categorize the organizations.
After the list is complied in spreadsheet form, organizations should be categorized into three classes: VERY SIMILAR TO CLIENT, SOMEWHAT SIMILAR TO CLIENT, and NOT VERY SIMILAR TO CLIENT based on ACT team’s analysis. This analysis should be reviewed by the client. Note: There may not be any organizations in the VERY SIMILAR category.
3. Gather additional information.
For organizations in the VERY SIMILAR and SOMEWHAT SIMILAR categories, add the following information for each organization to the list: mission statement, name of executive director, # of employees, and annual budget. The spreadsheet is a project deliverable.
Suggested Process - Part B
1. Create a list of up to six peer organizations using Guidestar databases and discussions with client.
- Research client organization in Guidestar. Guidestar has information on 1.5 million nonprofit organizations. Organizations are classified using NTEE codes.* Find the NTEE codes for client organization. If Guidestar doesn’t have a NTEE code for the client, search NTEE codes to find the appropriate code.
- Search Guidestar for peer organizations using NTEE codes. Generate a list of at least six peer organizations for analysis and comparison with client. Peer organizations should be selected so that each peer organization has similar activities to the client. Some of the peer organizations may be other branches of organization located in a different geographic area. (Some searches by NTEE code may have search results containing too many organizations. Limit scope of search by annual income range, if needed). Stanford GSB research has found that NTEE codes are quite accurate.
- Review websites of peer organizations to verify similarity with client organization.
- Review list of peer organizations with client. Have client add at least one organization to the list. Finalize list of peer organizations.
2. Conduct research on each peer organization - Mission, Vision, and Values; key data; and recent events for each organization
Conduct literature review on each peer organization using the following sources:
- Peer organizations website: Print last two annual reports and last two newsletters for future reference.
- Library database search: Use Lexis/Nexis Academic Universe in the library or online ProQuest for Stanford GSB alumni to search for recent events for each peer organization. This form of literature searching can be hard to do well—work with research librarians at Stanford GSB Library as appropriate.
Fill out as much of the Peer Organization Profile form as possible.
3. Obtain peer organization Executive Directors’ perspectives on positive and negative developments and trends.
Discuss with client areas of interest for calls to executive directors Call Executive Director at each peer organization with following questions:
- What’s been your organization’s greatest success over the last two years?
- What’s the most important challenge facing you this year?
- What’s the most important long-term challenge for your organization?
- What trends are you experiencing in funding and revenues?
- Do you see your mission or strategy changing in the next two years? How?
Add results of the interview to Peer Organization Profile.
4. Complete Environmental Scan Summary slide, and review with client.
Provide client with contact information for peer organization executive directors
- Nearby Organizations spreadsheet
- Peer Organization Profile forms (6)
- Environmental Scan Summary slide
- Assign one person to do a complete analysis of each peer organization. It’s best to have one person be the expert on each peer organization.
- Have client add at least one peer organization to the list. Have client add at least one question to the executive director question list.
*Nonprofit organizations cover a wide range of activities, services, and programs. Without a classification system that groups similar charities by purpose, type, or major function, it is difficult to understand the work of the nonprofit sector. The National Taxonomy of Exempt Entities (NTEE) is a definitive classification system for nonprofit organizations recognized as tax exempt under Internal Revenue Code 501(c)(3). The system, developed by the NCCS with the guidance of leading nonprofit scholars and practitioners, is used by the IRS, as well as by INDEPENDENT SECTOR, the Foundation Center AAFRC Trust for Philanthropy, and many grantmakers, foundations, researchers, and others working with nonprofit organizations. A streamlined version of the system is known as the National Taxonomy of Exempt Entities-Core Codes (NTEE-CC).
by Jan Leeman, MBA ’95